Very Specific Reduced Maximum Exclusion Question

Hi all,

I've searched for a while for an answer to my question, but all the examples I found seem to fall short. So I'm unclear as to whether my friend qualifies for the reduced capital gains exclusion on the home sale.

Here is the situation:

- Owned and occupied condo in CA from 10/2012 to 2/2014 (approx 16 mo.), laid off from preschool1 in 6/2013, left preschool2 in 12/2013

- Decided to open family child care, begun planning 12/2013

- Bought house 8 miles away for child care, moved in 2/2014

- Began renting condo as investment property in 2/2014

- Completed planning and started care operations 8/2014

- Sold condo 6/2016 (less than 5 years from purchase) Didn't want to sell earlier in case preschool did not pan out, and condo was better location for husband and his work, close to church, was trying to have baby.

Does she qualify for reduced exclusion based on change of employment because of living in the condo when change of employment took place?

From what I understand she would be eligible for an partial exclusion for the time before turning it into a rental property. The thing that worries me is that some time passed before the condo was sold, but there was no way they would have bet the cow on the business before it panned out. A little unclear about this rule.

I appreciate any feedback you could give me.

Thanks.

-Struggling

Owning the property for five years is probably irrelevant. The rule is that you qualify for the exclusion if you used the property as your principal residence for two years out of the last five.

Your story is vague, because you imply that your husband was using the property even after you started renting it out. Was he? For what and how much?

In some situations when you have used the property for fewer than two full years, you may qualify for a proportionate exemption if you are requred to sell the house early due to a change in place of employment, health, or other unforeseen circumstances.

It sounds like the sale was not due to unforeseen circumstances - you held on to the house after those circumstances and sold it at a later time.

My guess is that you would not qualify for any part of the exclusion on your condo.

Sorry.